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Even rich families don't talk money

Wealthy parents have trouble talking to their kids about money too, but financial advisers say everyone should teach their offspring valuable lessons about money.

By Giselle Smith Dec 2, 2011 3:10PM

When I was growing up, the family finances were a closely held secret. I had no idea what my father made, or how our family budget was balanced. When I had to fill out financial aid forms for college, my parents did their part last and I never looked at it. I knew that topic was off-limits.


Turns out that's pretty typical, even for high-net-worth parents -- that is, ones who don't need financial aid forms. Most wealthy parents have strong opinions about how their children should use the wealth they will eventually inherit, but most wait until their children are adults to communicate those ideas, according to a recent survey from SEI Private Wealth Management.


The survey of more than 100 individuals from families with more than $20 million in assets, conducted by independent research firm Scorpio Partnership, found that only 36% of wealthy parents have discussed their wealth and its implications with their children before the age of 21, and only 16% discuss it with children younger than 16.


"The survey results point to a growing wealth communication breakdown in high-net-worth families -- one that many believe is inhibiting the ability of future generations to sustain long-term wealth," SEI said.


Results of the 2011 U.S. Trust Insights on Wealth and Worth survey (.pdf file), released earlier this year, support those from the SEI survey. U.S. Trust found that 52% of parents had not fully disclosed their wealth to children, and 15% had told them nothing about it. Though 31% of the latter group said they had never thought to do so, others said they feared the knowledge would make their children lazy (24%), cause them to make poor decisions (20%) or let them be taken advantage of by others (13%).


Most parents in the U.S. Trust survey said they believed their children would not be able to adequately handle their family money until age 30 or older. Of these, 22% said their children would reach financial maturity by age 30, 51% said between the ages of 30 and 40, and 25% said at age 40 or older.


However, the study -- based on a nationwide survey of 457 adults with $3 million or more in investable assets -- also found that 49% of parents did not feel it was important to leave a financial inheritance.

 

Talking about money pays off

Communicating with children about wealth has positive results, the SEI survey found. Of those who involved their families in their financial interests, 43% described the experience as "fulfilling or liberating," though 39% called it "challenging, frustrating, or uncomfortable." Post continues below.

Of the families who reported sharing financial information, 71% said it was in informal conversations, 18% in formal family meetings, and 11% in private bank or investor meetings.


Family money advice for the wealthy

"It is important not to wait until the kids are in their 30s or 40s and are not prepared at all to receive the wealth," wealth psychology expert Kathleen Kingsbury, founder of KBK Wealth Connection, told The Wall Street Journal.


Some advice from SEI about talking to kids about family wealth:

  • Start early. Though your initial conversations may not be detailed, it's never too early to start talking about the topic.
  • Initiate the conversation. Don't wait for your kids to bring up the subject, because they might interpret your silence on the topic as meaning it's not up for discussion.
  • Communicate your values. If you talk about the family's wealth and how you want it used, your children will learn to develop their own values.
  • Make it an everyday topic. Don't confine conversations about money to formal, scheduled meetings, but instead put the issues into practical real-life contexts. Have casual conversations about money when you are paying a restaurant check or reviewing your investments.
  • Don't lecture. Let your kids ask questions and voice their concerns and opinions. They are more likely to open up with you if they can tell you are really listening to them.

Given that we weren't part of the 1%, I suspect my family's lack of financial transparency wasn't critical in the long run. But I would have expected more information if I'd had "high-net-worth" parents. Surely they would have wanted to prepare me if I were going to someday manage their millions.


What's it like in your family? Do you share information about the family finances with your kids -- or do your parents share with you? Do you think it's more important -- or less so -- if you have more at stake?

 

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7Comments
Dec 2, 2011 11:17PM
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I can't imagine discussing my finances with my deadbeat kids.  That would be like covering myself with barbeque sauce in front of a canniable.  Good luck to those high net individuals that do. Personally, I don't know why people have kids.
Dec 4, 2011 1:47AM
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Children are the worlds greatest treasure, everything else is temporary.
Dec 4, 2011 3:00PM
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I talk to my kids about havng a security blanket to fall back on...they can always come back home to live...if they fail...something i didn't have. I talk about investing and give financial advice to my college kids. They pursue their own dreams....any wealth passed onto them will be when they are in their forties...so they know they must be the ones to carve out their own lives prior to any windfall. Never give money to a child under 35...that's my rule.
Dec 4, 2011 5:35AM
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In many cases, parents don't want their kids going around bragging about how much they're worth.  Recently, I gave my 11-yr old nephew an alto saxophone and spent $457.50 to repad it.  It's a 1984 sax and has some scratches on it, but I told my nephew that he's got a $1000 sax with much better tone, action, and is made much more solidly than the new $295 Chinese junk being sold or rented in the music shops.  Then realizing my error, I quickly told him: don't tell anyone you've got a sax worth over $1000!
Dec 3, 2011 10:40AM
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You should never tell your children about your assets.

First,it can be used during a divorce proceeding against you.

Second,it may encourage them to stop going to school,stop going out to look for work,stop looking for opportunities in other areas of the country or world.They may decide to stay at or return home.Wose it ignites sibling rivalry before there's any reason for it at all.

Lastly, let your foolish child decide to punish his cousins by revealing how much you have in your bank accounts,homes,boats,or planes.How many more relatives will move closer to you when they have financial emergencies,or deadbeat children.These are the major reasons the father or mother kept the financial knowledge about the family within their little venue.

Dec 3, 2011 11:35AM
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How could your children possibly be as important as your money?    I guess that's why i'm financially poor.
I am wealthy with my children and grandchildren like few will ever know. You can't live for ever nor take it with you.
What happened that you feel this way about your children or for that matter plan on divorce? Good luck to you folks.
I mean that with all my heart...

Jan 21, 2012 2:14PM
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Amazing how few people even posted comments on this story. One of my parents tried to discuss wealth status with me twice. They just couldn't do it. It started as a medical advisory but they couldn't /wouldn't offer the name of their doctor, lawyer, accountant or the what institutions their funds were in. I tried to prod courteously but I could sense the road blocks and didn't want this conversation to become a morbid discussion about end-of-life. So like other families I know, it will be a game of discovery during the planning of a funeral. (Barbeque sauce in front of a cannibal???)
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